Q&A: The Most TAXING Time of Year

How to Survive the 70,000-Page IRS Swamp?First, make sure your guide is a Good CPA

Kirk Fegley, CPA, CSEP, has been a partner at
Fleming, Brockschmidt & Durkin PLL since 1987. He specializes in
tax work for small businesses and estate planning.

What are some of the new tax credits people can expect this year?

They’ve
been around before, but there are energy credits, which people should
take a look at if they’ve made expenditures on their home in the last
year for qualifying windows, doors, central air-conditioning, furnaces,
heat pumps, water heaters and insulation.

There
is also the first-time home-buyer credit, which has gotten a lot of
attention. That’s been recently extended, and it’s a great opportunity
for somebody who’s just done with school, or is in the position where
they can actually buy a house. It’s also extended to people who may
have owned a home for five years, and basically they could move into a
different home and take advantage of the credit. It’s a lower dollar
credit, but it’s worth taking a look.

Taxpayers
who choose to deduct state and local income taxes, or who claim the
standard deduction, can also deduct sales taxes paid on cars, light
trucks, motorcycles and motor homes purchased between 2-16-09 and
12-31-09 (subject to phase out if your income is too high). Also, the
education credit has been improved for 2009, but is also subject to
phase out with too high of an income.

What should people keep in mind if they decide to do their taxes online?

They
can do that on government web sites, but a lot of times it’s just
geared to people with a very simple tax return, like a W-2. If they
have stock sales, rental properties, or anything over just being a wage
earner, it probably won’t work for them. However, complex returns can
be e-filed by store-bought software programs and by paid tax preparers
who are set up to transmit returns.

If people need further help with their taxes, what kind of services are available?

There
are some very good, and not hard-to-read publications, available at the
public library. They can also come see a professional if they don’t
want to take the time to do it themselves, or if they’re unsure working
with all these complex laws whether the software or books they’re using
will be enough to make sure they’re paying the least amount of tax. The
software has gotten better, but there’s no substitute for actually
knowing the laws and being able to look at the whole picture with the
knowledge of the law.

What is the situation surrounding capital gains taxes?

There
haven’t been any significant changes from last year to this year.
Basically the situation is that if you are in the lowest tax bracket,
you might actually be able to pay no tax at all if a significant part
of your income is from capital gains. If you have enough income to get
to the next bracket after that, chances are you’ll pay a tax on capital
gains, but only at a 15 percent rate.

What do people need to think about with inheritance taxes?

We
are in a year right now where there is no estate tax at the federal
level. That is probably going to retroactively change. This has been on
the books for a long time, and Congress has been so busy with health
care and everything last year that they didn’t address this issue. But
believe me – they’re going to. What they’re going to do, we don’t know
yet, but at this point what you probably want to do if a member of your
family should unfortunately pass away, is do not plan on paying no tax
at all.